‘Digital payments need capital support to reach next level’

Kumar also said that the India needs newer regulations for start-up funding as traditional banking models don’t cater to such business models.

ET Bureau

September 06, 2019, 08:38 IST

The latest merger of state-run banks has brought down their number to 12 from the 27 but branches are here to stay, said Rajnish Kumar, chairman of State Bank of India, the country’s largest state-run bank.

“Even digital feels the need for physical, even e-commerce companies are opening physical stores,” Kumar said at the 6th SBI Banking and Economics Conclave. “It’s not either or; we have to offer all solutions. My branches are my biggest step in promoting our digital platforms.”

While data shows that state-run banks have been downing shutters on ATMs and branches in bigger cities, most PSB chiefs said they won’t shut branches even when 10 banks were overnight merged into four. With urban customers taking to digital channels, the cost of branch keeping has become expensive in certain metro cities. Kumar also said that the India needs newer regulations for start-up funding as traditional banking models don’t cater to such business models.

“We set aside a fund for startups, but have not used a single penny in three years,” he said. “I feel all public sector banks can come together and set up a fund for startups. That structure may work.” Prime minister Narendra Modi’s government has set a target for $5 trillion Indian economy till 2025. With the economy in the grips of a slowdown and latest GDP growth data of 5 per cent a six-year low, calls for newer lending practices have grown louder.

“Payment banks didn’t survive, too bad. In a knowledge economy, the decay of organisations will be faster,” said Dinanath Dubhashi, MD, L&T Finance Holdings. “Lending with collateral is dead. Lending with analytics is the way to go.” Transactions made through UPI have, for the first time, crossed the 900 million mark in August, led by an increase in merchant adoption of the payment channel and improved smartphone penetration in certain states.

But, further growth in digital payments will be a lot tougher, said industry experts.

“The journey will be harder going forward due to literacy issues. We need more capital in payments systems and profitability of businesses because somebody has to create acceptance systems to cater to merchants,” said Dilip Asbe, CEO, National Payments Corporation of India (NPCI).

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